Chapter17-1

Pricing of Services

17

Three Key Ways that Service Prices Are

Different for Consumers
Approaches to Pricing Services
Pricing Strategies that Link to the Four
Value Definitions

McGraw-Hill/Irwin

Copyright 2009 by The McGraw-Hill Companies, Inc. All

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Objectives for Chapter 17:

Pricing of Services
Discuss three major ways that service prices are perceived
differently from goods prices by customers.
Articulate the key ways that pricing of services differs from
pricing of goods from a companys perspective.
Demonstrate what value means to customers and the role
that price plays in value.
Describe strategies that companies use to price services.
Give examples of pricing strategy in action.

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Pricing Quiz
Which dentist would you choose for a filling
in your tooth?
Dentist

Cost for
Filling

Distance
to Dentist

Wait Period
for an
Appointment

Time in
Waiting
Room

Anesthesia

$50

15 miles

3 Weeks

1.5 hour

None

$75

15 miles

1 Week

.5 hour

Novocain

$125

3 miles

1 Week

1 hour

Novocain

$200

3 miles

1 Week

No wait

Nitrous Oxide
& Novocain

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Customer Often Lack of Knowledge of

Service Prices
Customers often lack reference prices for
service
Service variability limits knowledge
Providers are unwilling to estimate prices
Individual customer needs vary
Collection of price information by customers
is difficult
Prices are not visible

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The Role of Non-monetary Price

Time costs
Search costs
Convenience costs
Psychological costs

Do you trade time for money?

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Price as an Indicator of Service Quality

Can price attract some

customers?

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Price as an Indicator of Service Quality

Infers High Quality

Service

Infers Low Quality Service

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Three Basic Marketing Price Structures

and Challenges for Services

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A Customer-Focused Approach to
The Pricing Process

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Four Customer Definitions of Value

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Pricing Strategies When the Customer

Defines Value as Low Price

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Pricing Strategies When the Customer Defines

Value as Everything Wanted in a Service

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Pricing Strategies When the Customer

Defines Value as Quality for the Price Paid

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Pricing Strategies When the Customer Defines

Value as All that Is Received for All that Is Given

17-15

Summary of Service Pricing Strategies for

Four Customer Definitions of Value